Oil market giants will be surprised if we believe the recent statements of OPEC plus leaders, Saudi Arabia and Russia, as the current OPEC Plus approach is not sustainable. If oil inventories remain high and demand weak, markets will not see a full recovery.
In this case, Moscow and Riyadh must find a long-term solution if they want to see a real recovery in oil markets, and if not, the potential dispute between Saudi Arabia and Russia is looming on the horizon, according to a report published by oil price. The American.
Author Cyril Wadshofen says in that report that the official views proposed by the OPEC Plus Joint Ministerial Oversight Committee over the past few days are a positive sign, while the pace of current production cuts is being eased in August as a result of anticipated high demand.
The Saudi Energy Minister and OPEC’s main power broker, Prince Abdulaziz bin Salman, envisions a development in which the OPEC Plus oil production agreement will be extended until the end of 2021 or until the beginning of 2022.
The writer mentioned that the markets did not absorb this news so far, as it shows a possible division of views within OPEC Plus, and it is indicated that Prince Abdulaziz’s statements differ from the view of the Russian Energy Minister, Alexander Novak, regarding the oil market.
Novak said on Wednesday that the expected easing of the oil production cut by OPEC Plus from August to 7.7 million barrels per day is justified and in line with market trends, and Russia's views on the possible increase in demand for oil and oil products worldwide appear More optimistic.
Saudi Arabia has made it clear that it does not want to face a possible economic recovery in the form of a "W" and a possible second wave of corona, and at least this appears to be the official message that Saudi Arabia wants to send, but the implicit message can be more ambiguous and cause an internal discussion in OPEC Plus, As it could threaten Saudi Arabia to retreat from being responsible for the largest share of oil production cuts.
The major Saudi oil strategy is facing cash at home with the continued decline in export revenues, as official data provided by Riyadh and the Joint Energy Data Initiative (Judy) indicate that the kingdom's total exports of oil, including crude oil and oil products, decreased to 7.48 million barrels per day. In May from the 11.34 million bpd recorded in April, it is reported that exports in June and July may have registered a lower percentage, and the same could apply to Russian oil production.
The author pointed out that the basics of oil do not appear normal, even with OPEC Plus members making statements proving otherwise in the media, but the result of the monthly meeting of the OPEC Plus Joint Ministerial Monitoring Committee is a clear sign of the growing desire of Russia and some other OPEC members to cancel the production cut agreement Current oil.
The current power struggle is hidden behind the veil of statements that spark the attention of the media, but there is a clear danger now from Moscow and Riyadh heading towards a new conflict, and at the present time, there is no direct risk of such an occurrence, but Riyadh is tired of bearing the brunt of the production cuts, While struggling to sustain the growth of its economy, according to the author.
The international media have touched on the lack of a critical analysis of the crucial developments inherent in OPEC Plus, and the decision to reduce the current production cut is a comprehensive sign of the belief in the possibility of a global economic recovery in the coming months.
Indeed, this belief is based on somewhat unstable bases, as the second wave of Covid-19 has already begun to appear in several places, yet OPEC, Russia and its allies have decided to change their relatively successful strategy by August 1.
In order not to risk another internal crisis or a war over the share of oil and a direct market war between Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, a settlement based on fragile foundations has been proposed, and currently the oil market is expected to suffer from a deficit, leading to the withdrawal of oil Crude is in storage, and in 2021, OPEC is looking to increase its total production by 6 million barrels per day.
Nevertheless, the possibility of a real economic recovery remains weak, even in its special report, OPEC stated that it feared the imbalance of oil markets, especially if it weakened a second wave of Covid-19 economic recovery, and the writer clarified that OPEC's decision to reduce or increase production represents a decision Unilateral, the real problem is that once an OPEC member raises production, the rest of the members may follow in his footsteps.
In addition, there is a risk of shale oil boom in the United States again, and an increase in production by OPEC Plus will lead to an increase in abundance, as other oil producing countries will not feel obligated to continue implementing the cuts and will instead feel the need to provide their share In the market.
The author concludes that the very fragile balance at the present time between supply and demand can turn into an abundance in production, and after months of news about the oil storage crisis, global stocks are still full and need to be consumed to achieve stability in the market, on the other hand, negative signs of influence began The real economist of Covid-19 in Europe is emerging, especially with the increase in bankruptcies and the continuing high levels of unemployment.